US LNG Project Halt’s Impact on Mexico

The Biden administration has announced a freeze on approvals for new LNG exports to non-Free Trade Agreement (FTA) countries “until the Department of Energy can update the underlying analyses for authorizations.” This decision marks a significant departure from the United States’ traditional stance, signaling a reassessment of the climate and health impacts associated with oil and gas ventures.

The White House has instructed the Energy Department to broaden its evaluation criteria for new gas export projects. Biden’s administration, in a press release, emphasized that this temporary pause on LNG approvals aims to comprehensively assess the consequences on various fronts: energy costs, national energy security, and environmental sustainability. The administration's stance recognizes the climate crisis as an existential threat demanding immediate attention.

The revamp entails a freeze on the approval for the Calcasieu Pass terminal (CP2), slated to be the largest gas export terminal in the United States. Additionally, over 10 other projects awaiting approval along the Gulf Coast will be affected by this unprecedented decision, reports the Center for Biological Diversity. 

This move follows the global commitment made at the COP28 climate summit in December, where nations pledged to shift away from fossil fuels. Notably, 170 scientists, post-summit, sent a letter to President Biden urging the rejection of CP2 and similar projects in alignment with the international agreement and climate science. The Biden administration's decision reflects a conscientious effort to align with scientific consensus and global commitments to address the pressing challenges of our time, says the Center. “From accelerating the climate emergency to directly threatening communities and wildlife, the science is clear that new fossil fuel infrastructure projects are contrary to the public interest.”

Biden's decision has faced criticism, with some characterizing his environmental policies as having a "mixed record." This assessment stems from the cancellation of certain oil projects alongside approvals for others. Notably, the pause on natural gas exports is limited to future projects. The policy announcement explicitly stated that shipments will continue, with expectations of a doubling in exports by the end of the decade, as reported by Quartz.

Moreover, the US move has put great pressure on other countries over energy sufficiency concerns. According to The New York Times, this move could create uncertainty, especially in Europe as it faces great risk due to the ongoing conflict in Ukraine. “(Europe) has only recently weathered a major energy shock after Russia’s invasion of Ukraine almost two years ago.”

Despite the Mexican government's focus on energy sovereignty, purchases of natural gas from the United States have surged by 34% since 2018, according to El Economista. This trend gains significance in the context of the operational state of emergency declared by the National Energy Center (CENACE). These states of emergency are regular during cold weather seasons in the south of the United States and threaten Mexico’s energy stability. Several players have urged Mexico to rethink its energy strategy centered around US natural gas imports.

The uncertainty surrounding LNG export projects in the United States could drive investment in liquefaction projects elsewhere, including Latin America, says Baker Hughes. "If we see any slowdown in the United States, it is clear that there are international projects that can take advantage of the opportunity, and we will continue to monitor the situation," says Lorenzo Simonelli, CEO, Baker Hughes. Warren Levy, CEO, Jaguar E&P, highlights the need for an industry plan to secure a less dependent relationship with the US, particularly amid nearshoring opportunities.

While the US’ decision is driven by its approach to environmental considerations, the use of natural gas in Mexico is also tied to economic development and addressing energy poverty in the country. Despite Mexico's competitive natural gas prices, uneven distribution and lack of access in the south create social disparities that should be addressed through comprehensive gas pipeline development.

Natural gas is widely considered as the transition fuel for a country grappling with significant levels of energy poverty and the opportunity to attract foreign investment, which accounts for an important portion of economic growth. Mexico deals with several challenges in its energy strategy such as unequal access to energy across the country, lack of infrastructure to attend to the projected energy demand as well as a need to increase cleaner energy sources to attract investments. “It is crucial to recognize that, despite aspiring to completely clean energy sources, there is a learning process and a road under construction. Even the International Energy Agency and the European Union has not yet issued definitive guidelines for categorizing natural gas as clean energy, although they recognize its necessary role in the energy transition,” says Guillermo Gómez, Director General, Consultoría Sustentable G2H.

Following the consensus at COP28 on the urgent need to cut emissions and transition to clean energy globally, the challenge remains, particularly in emerging economies. Developed economies, spearheaded by figures like John Kerry, Special Presidential Envoy for Climate in the United States, have actively championed a greener agenda worldwide. Kerry has played a significant role in overseeing and developing projects with other nations to propel their energy transition efforts. However, this scenario unveils a unique challenge of the energy transition: how emerging economies cope with and adapt to these new regulations. 

Greenpeace, Organizations Urge Mexico to Cancel LNG Projects

In response to President Joe Biden's decision to halt approvals for new Liquefied Natural Gas (LNG) export terminal projects in the United States due to their environmental impact, various civil society organizations in Mexico are urging the Mexican government to cancel similar projects in the country.